The gold bull rally started in November from $1600 to $1950 in January. February was a profit-booking month, with prices correcting to $1810. March and April saw a pullback in prices, with a record high of $2080 in the first week of May. That euphoria, however, was fading away, as we spent the next three weeks of May in a sharp downtrend, with prices falling to a two-month low of $1936 on May 31. What does this pattern signify?
Weekly Blogs
US Debt ceiling deal reached to avoid default
To avoid default before a June deadline, US lawmakers over the weekend came to an “in principle” agreement to raise the US spending ceiling for two years up to 1st Jan 2025. Gold and Silver prices are expected to see a relief rally and a short-covering rally at the start of the week after the debt deal news announcement.
US Debt ceiling impact on Bullion
Since 1960, the US debt ceiling has been raised, extended, or revised 78 times. As of June 1, 2023, the current debt ceiling is $31.4 trillion. Gold and silver prices are consistently supported by market negotiations and risk-on sentiment. Gold and Silver prices have retraced from the last two weeks, as it was in an overbought zone.
Impact of US M2 growth contraction on Gold and Silver
US Money Supply (M2) growth has turned into the negative zone on a YoY basis with a level of -4% in March 2023. This is a massive economic warning as the last money supply contraction happened 93 years back, during the Great Depression of 1929. Whenever it happened, we had a Depression/Major Banking Crisis. Check out, what is its impact on Gold and Silver prices.
Two themes pushing Gold and Silver: De-dollarisation & Recession
Gold and Silver have been on an unstoppable run, skyrocketing from the $1800 (Rs 55000) level at the beginning of March to above $2060/oz (Rs 61000) – notching up a spectacular gain of over 12%, in the past 40 days. While Silver has whoppingly risen 30% from $20 (Rs 61500) at the beginning of March to $26 (Rs 77500) this week. The question is what is the reason for such an impressive rally in the last 40 days and is this sustainable?
Gold and Silver prices could rise 20% in FY 2023-24
The environment is very bullish and is expected to take prices 20% higher from current levels towards $2400 (~Rs 70000) for Gold and $30 (~Rs 90000) for Silver in FY 2023-24. This article discusses the top 10 fundamental reasons for bullishness in prices in FY 2023-24
Gold rises 15% in FY 2022-23
First quarter of 2023 was very exciting for Gold and Silver with prices closing near record high levels around Rs 60000 and Rs 72000 respectively. In FY 2022-23, Gold prices rose more than 15% from Rs 51500 to Rs 60000, while Silver prices had W-shaped recovery.
FED generally raises rates, until something breaks
It is noticed that, whenever FED has started monetary tightening by raising Interest rates, it is followed by a burst or crisis in our financial system. And when such a crisis breaks out in the headlines, then only FED stops raising rates. And this time again, Gold has emerged as the best safe-heaven hedge during the banking turmoil.
Target achieved in Gold at Rs 60000
On 21st Dec 2022, we advised buying gold around $1820 (~Rs 55000/10 gm) in the report titled “Inverse Head and Shoulder pattern target Rs 60000 for Gold in 2023” for the target of Rs $2020 (Rs 60000/ 10 gm) in 2023. This target is achieved yesterday as Gold prices hit a high of Rs 60450 in the domestic market amid the banking crisis. Long positions should be booked and one should wait for prices to correct to initiate new buy positions, as the long-term outlook is still bullish on Gold
Gold hits all time high amid US banking crisis
Gold and SIlver prices have skyrocketed since the United States’ banking crisis erupted a week ago. When there is a crisis of confidence, especially in our financial system and banking sector, people seek safe havens. And gold is arguably the most well-known safe haven in the world. Gold still has steam left to head towards $2000 (Rs 60000) before the FED Wednesday meeting.
Gold and Silver find support for a bull run
Gold and Silver’s prices have retraced to important support levels of Rs 55000 and Rs 62000 respectively as forecasted. As instructed in the previous week, those were the ideal levels for buying. The next move can be an up-move, buying on dips should be a strategy used for the medium term, as the downside seems limited.
Gold and Silver continue downslide as Inflation risk remains elevated
Gold has fallen further towards Rs 55400 as expected, this increases the likelihood of further losses toward the long-term 200-DMA, currently seen around Rs 54900-55000.